150 Hours and the Market

By John S. Yelvington

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FEBRUARY 2005 - Patricia B. Abels, in “The 150-Hour Requirement and Its Effect on Student Enrollment” (April 2004), summarizes why the 150-hour requirement was initially implemented. She contends that current salaries yield insufficient payback, because of the explicit cost of additional education and the opportunity cost of a year of foregone salary, both assertions agreed to wholeheartedly by the author. Insufficient payback has reduced the number of students entering the profession and has endangered the long-term future of the profession.

Given that the payback is insufficient, the only way to “stop the bleeding” is for new “five-year CPAs” to receive higher salaries than “non-five-year CPAs” (four-year CPAs or other four-year degrees).

Responding to Abels’ article, accounting professor Susan B. Anders (“Does the 150-Hour Requirement Affect Student Enrollment? Money Talks,” August 2004) suggests that firms should pay more for five-year CPAs. The only way five-year CPAs can receive more pay is if the market is willing to pay the “wage premium.” The market will pay the premium only if five-year CPAs show additional value in the form of increased productivity, better adaptability, or better interpersonal skills.

Both Anders and Abels state that this premium is not currently being realized by five-year CPAs; thus, the market is sending a clear signal: Five-year CPAs have not proved themselves more productive than non-five-year CPAs.

A free market cannot be forced to purchase an overpriced commodity. The profession appears to have three possible solutions:

  • Continue as is with no changes;
  • Revoke the requirement; or
  • Move to raise salaries by raising the market value of five-year CPAs.

The only practical solution is the last. The CPA profession must understand what skills the market is willing to pay for. Instead of additional accounting skills, the market may value additional nonaccounting or nontechnical skills. Once deficiencies are identified, it is incumbent on the profession to require new CPAs to gain such skills. Myriad issues must be addressed to ensure that a stream of qualified young professionals will carry the profession in years to come.

John S. Yelvington, PhD, CPA, is an assistant professor of economics at Reinhardt College, Waleska, Ga. He gratefully acknowledges the contribution of Howard L. Reese, PhD, CPA, an associate professor of accounting at Reinhardt.





















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